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Exhibit 99.1
AGREEMENT
This Agreement, dated as of September 30, 2001, is entered into among
SWS Securities, Inc., a Delaware corporation (the "BUYER"), Xxxxx X. Xxxxxxxxxx
(the "TRUSTEE"), solely in his capacity as trustee for the liquidation of the
business of MJK Clearing, Inc., a Minnesota corporation (the "DEBTOR"), and the
Securities Investor Protection Corporation, a non-profit membership corporation
("SIPC") created by the Securities Investor Protection Act of 1970, as amended,
15 U.S.C. Section 78aaa ("SIPA").
RECITALS
A. Pursuant to an application filed by SIPC on September 27, 2001 (the
"FILING DATE"), a protective decree (the "PROTECTIVE DECREE") was entered by the
United States District Court for the District of Minnesota (the "DISTRICT
COURT"), in accordance with 15 U.S.C. Section 78eee(b)(1) adjudging and
decreeing that the customers of the Debtor are in need of the protection
afforded them under SIPA (the "LIQUIDATION PROCEEDING").
B. Pursuant to the Protective Decree, Xxxxx X. Xxxxxxxxxx has been
appointed as Trustee for the liquidation of the business of the Debtor in the
Liquidation Proceeding, has duly qualified as the Trustee, and has been acting
in that capacity since his appointment on September 27, 2001.
C. On September 27, 2001, the Liquidation Proceeding was removed from
the District Court to the United States Bankruptcy Court for the District of
Minnesota (the "BANKRUPTCY COURT") pursuant to 15 U.S.C. Section 78eee(b)(4).
D. As part of the Liquidation Proceeding and pursuant to the authority
granted to the Trustee under 15 U.S.C. Section 78fff-2(f) to sell, transfer, and
assign customer accounts of the Debtor, the Trustee desires to sell, transfer,
and assign to the Buyer, and the Buyer desires to purchase and assume, certain
of the customer accounts of the Debtor as more particularly set forth herein,
and, incident thereto, the Buyer has agreed to cooperate with customers in order
to facilitate as quickly as possible access to their respective accounts.
E. The Trustee deems such sale, transfer, and assignment to be in the
best interests of the Debtor's estate, customers, and creditors, in that the
same will facilitate the prompt disposition of customer claims and the orderly
liquidation of the Debtor, will result in reduced costs of administration, will
provide funds to the estate of the Debtor and will enable customers of the
Debtor to exercise control over their accounts at as early a date as possible.
F. SIPC has given its approval to such sale, transfer, and assignment,
and SIPC is willing to guarantee certain obligations of the Trustee hereunder.
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AGREEMENT
Now, therefore, the parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"ASSIGNED ACCOUNTS" means all customer accounts of the Debtor except:
(a) all accounts of directors and officers of the Debtor,
shareholders of the Debtor having any beneficial ownership of five
percent or more of the securities of the Debtor, and other persons
having the power to exercise controlling influence over the Debtor;
(b) all accounts with respect to subordinated debt;
(c) all accounts of brokers, dealers, or banks (other than
brokers, dealers, and banks listed in Schedule 1.1);
(d) any accounts that are unsecured or partially secured or
not margined in accordance with New York Stock Exchange requirements
based upon the values of securities held in such account as of the
Delivery Date or are identified as such after the Delivery Date; and
(e) any other accounts not covered by SIPA protection under 15
U.S.C. Section 78fff-3(a).
"DELIVERY DATE" means the first business day following the date of the
Order (as defined Section 4).
2. Sale, Transfer, and Assignment of Assigned Accounts.
(a) On the Delivery Date, but subject to the terms and
conditions of this Agreement, the Trustee shall sell, transfer, and
assign to the Buyer, effective as of the opening of business on the
Delivery Date, all of the Assigned Accounts, which shall consist of all
account records (or copies or electronic versions thereof, as
determined by the Trustee) and all securities and funds in such
accounts as reflected in the books and records of the Debtor as of the
close of business on the Filing Date (as limited by Section 2(f)) or
which may thereafter be determined to be the property of such accounts.
In connection with the transfer of Assigned Accounts for customers of
the introducing broker-dealers affiliated with the Debtor,
simultaneously with the execution and delivery of this Agreement, the
Buyer is entering into new clearing agreements with such
broker-dealers. In connection with the transfer of Assigned Accounts
for customers of introducing broker-dealers not affiliated with the
Debtor, on the Delivery Date the
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Trustee will assign to the Buyer all of its right, title, and interest
in the clearing agreements listed on Schedule 2.1 hereto.
(b) The Buyer shall accept delivery of each Assigned Account
transferred to it pursuant to Section 2(a), and, with respect to each
such Assigned Account, shall:
(i) upon and against delivery of such Assigned
Account, pay to or upon the order of the Trustee any debit
balance in any such Assigned Account to the extent such debit
balance is reflected in the Debtor's records of such Assigned
Account as of the close of business on the Filing Date;
(ii) upon and against delivery of such Assigned
Account, deliver to or upon the order of the Trustee each
short position in such Assigned Account to the extent such
short position is reflected in the Debtor's records of such
Assigned Account as of the close of business on the Filing
Date; and
(iii) from and after the Delivery Date, assume full
responsibility for and discharge the obligations of the
Trustee to the customer of such Assigned Account for any
credit balance or long position in such Assigned Account to
the extent such credit balance or long position is reflected
in the Debtor's records of such Assigned Account as of the
close of business on the Filing Date.
The foregoing notwithstanding, the Buyer shall not have liability or
obligation with respect to the Assigned Accounts for any claim arising
out of any act, transaction, or omission that predates the Delivery
Date and for which the Buyer is not indemnified by the Trustee
hereunder.
(c) The Buyer shall bear all clearing and depository charges,
administrative fees and expenses, and data processing costs that may be
charged to or incurred by the Buyer arising on or after the Delivery
Date in connection with the transfer of the Assigned Accounts, and all
securities and funds relating thereto to the Buyer pursuant to this
Agreement, but not any costs or expenses incurred by the Trustee or the
Debtor in connection therewith.
(d) As promptly as practicable in the Buyer's judgment, the
Buyer (at its expense) shall generate or cause to be generated a
notice, in a form to be prepared by the Buyer and approved by SIPC and
the Trustee (such approval not to be unreasonably withheld or delayed),
which notice shall contain:
(i) the new account number, if any, assigned by the
Buyer, and
(ii) the name of the Assigned Account as listed by
the Buyer,
and shall deliver or cause to be delivered such notice by mail to all
customers of the Debtor with respect to Assigned Accounts whose names
and addresses appear in the records of the Debtor as of the close of
business on the Filing Date. If, in order to
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expedite communications with customers, the Buyer uses any forms
containing the name of the Debtor, then, to the extent practicable,
each such form shall be accompanied by a notice from the Buyer to the
effect that such customer's account has been assigned to the Buyer.
(e) The Buyer shall not, directly or indirectly, charge,
assess, or pass on any costs in connection with this Agreement to the
Assigned Accounts; provided, however, that this Section 2(e) shall not
prohibit the Buyer from charging customers its customary amounts for
processing customer transactions or carrying customer accounts from and
after the Delivery Date.
(f) Except as otherwise expressly provided in Schedule 1.1
with respect to certain accounts, to the extent that securities and
funds in any Assigned Account, as reflected in the books and records of
the Debtor as of the close of business on the Filing Date, exceed the
limits of protection set forth in 15 U.S.C. Section 78fff-3, the Buyer
will only accept that portion, if any, of the securities and funds in
such account as does not exceed such limits. In that event, with
respect to the securities positions in such account, the Trustee and
the Buyer will mutually decide which of such securities not exceeding
those limits the Buyer agrees to accept. If no such agreement can be
reached, the Buyer agrees to accept, on a pro rata basis, a portion of
each position in such account so that the aggregate value of all
securities accepted by the Buyer for that account will be less than or
equal to such limits. This provision will apply to those accounts that
are known on the Delivery Date to exceed such limits and to those
accounts that after the Delivery Date are discovered to have exceeded
such limits, or are claimed by any customer to exceed such limits,
whether or not the books and records of the Debtor as to such accounts
reflected such excess.
(g) Any account delivered that does not qualify, on the
Delivery Date or within 30 days thereafter, as an Assigned Account
within the meaning of that term as set forth in Section 1 shall, within
30 days, be returned to the Trustee, in which case the Trustee shall
remit to the Buyer any amounts paid or securities delivered to the
Trustee by the Buyer in respect of any such account pursuant to Section
2(b).
3. Certain Transition Matters.
(a) In order to expedite the resumption of clearing for the
Assigned Accounts, the Buyer intends to conduct its clearing operations
for the Assigned Accounts during a transition period of up to three
months (the "TRANSITION PERIOD") using the systems of the Debtor (at
the Buyer's expense).
(b) The Buyer may, but is not obligated to, offer employment
on a temporary basis to personnel heretofore employed by the Debtor in
its clearing operations whose services may become needed by the Debtor
during the Transition Period. The Trustee will endeavor in good faith
to facilitate any such temporary employment by the Buyer. In no event
shall the Buyer be or become liable for or assume any liability of the
Debtor with respect to the employment of persons by the Debtor prior to
the Delivery Date.
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(c) If any property of the Debtor heretofore utilized in the
conduct of its clearing operations is required by the Buyer in the
conduct of clearing operations of the Debtor during the Transition
Period and such property is available to the Trustee, the Trustee will
make such property available to the Buyer for its use, provided that
the Buyer pays, or reimburses the Trustee for payment of, the necessary
and normal expenses incurred in connection with the use thereof.
(d) If any property or service heretofore provided to the
Debtor in the conduct of its clearing operations by a vendor under a
contract between the Debtor and the vendor is required by the Buyer in
the conduct of clearing operations on the premises of Debtor during the
Transition Period, the Trustee will assign all of its right, title and
interest in any such contract to the Buyer if so requested by Buyer.
4. Approval of the Bankruptcy Court. Prior to the Delivery Date, the
Trustee shall obtain an order of the Bankruptcy Court (the "ORDER") approving
this Agreement and the transactions contemplated hereby. The obligations of the
parties hereunder shall be conditioned upon the issuance of the Order.
5. Indemnification by Trustee.
(a) The Trustee shall indemnify the Buyer against:
(i) any loss arising out of any irregularity, impropriety,
error, or omission in the amount of any debit or credit
balance or any long or short position in the account records
of the Debtor as of the close of business on the Filing Date
or as provided by the Trustee to the Buyer after the Delivery
Date, except for account differences of $100 or less per
Assigned Account (which shall be borne by the Buyer as
provided in Section 5(c)); and
(ii) any loss arising out of the failure of the
Trustee to deliver any cash credit balance or securities long
position owed in respect of any Assigned Account as reflected
in the account records of such Assigned Account as of the
close of business on the Filing Date and any cash balance due
or security position owed with respect to transactions for the
account of the Trustee.
(b) It is understood and agreed that the foregoing
indemnification by the Trustee:
(i) shall not exceed the limits of protection set
forth in 15 U.S.C. Section 78fff-3;
(ii) shall not be available for the protection of an
Assigned Account if the Trustee has not received written
notice of the difference in such Assigned Account attributable
to any such deficiency, irregularity, impropriety, error,
omission, or failure of the Trustee to deliver any cash credit
balance or securities
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long position therein within six months following the date of
publication of the notice required by 15 U.S.C. Sections
78fff-2(a)(1) and (3); and
(iii) shall require the Trustee to pay over to the
Buyer any funds received in this connection pursuant to
Section 6.
(c) The obligations of the Trustee to indemnify the Buyer as
provided above shall, with respect to any Assigned Account or position
therein as to which there is a dispute between the Buyer and the
customer, be conditioned upon the immediate return to the Trustee by
the Buyer, if the Trustee so desires and upon the Trustee's demand
therefor, of such Assigned Account or the disputed position therein for
which indemnification is sought, subject to the Buyer's right to
protect its interest in such Assigned Account with respect to
transactions therein settled or unsettled or deliveries of cash or
securities to such customer subsequent to the Delivery Date. Prior to
the return by the Buyer of any such Assigned Account or position
therein, the Buyer and the Trustee shall attempt to settle the dispute
with the customer informally, with notice to SIPC. Where a claimed
account difference in an Assigned Account is $100 or less, the Buyer
shall pay such difference without any right to indemnification by the
Trustee. If the claimed difference is more than $100, the Buyer shall
be entitled to indemnification by the Trustee for the full amount of
such difference.
(d) Notwithstanding anything to the contrary herein, and
subject to the proviso to Section 6, the Buyer shall look solely to the
guarantee and security provided by SIPC pursuant to Section 6 for the
satisfaction of the obligations of the Trustee under this Section 5.
6. Guarantees by SIPC; Limitation On Liability. Pursuant to the
provisions of 15 U.S.C. Section 78fff-2(f), the funds of SIPC will be made
available to guarantee and secure the indemnification and other obligations
undertaken by the Trustee under this Agreement with respect to Assigned
Accounts; provided, however, that such indemnification shall not extend to
losses that are the result of any act of dishonesty or fraud by the Trustee for
which the Trustee would be personally surcharged pursuant to the provisions of
SIPA or the United States Bankruptcy Code. THE TRUSTEE IS ENTERING INTO THIS
AGREEMENT SOLELY IN HIS CAPACITY AS TRUSTEE, AND HE SHALL HAVE NO PERSONAL
RESPONSIBILITY OR LIABILITY UNDER ANY PROVISION OF THE AGREEMENT, EXCEPT WITH
RESPECT TO ANY ACTS OF FRAUD OR DISHONESTY.
7. Indemnification by the Buyer. Upon receipt of notice from the
Trustee, the Buyer shall return immediately to the Trustee all cash credit
balances or securities long positions that were credited in error to an Assigned
Account and delivered to the Buyer on the Delivery Date, provided that the Buyer
is in possession of such erroneously delivered cash balances or securities upon
receipt of such notice and subject to the Buyer's right to protect its interest
in such Assigned Account with respect to transactions therein settled or
unsettled and with respect to deliveries of cash or securities to the respective
customer subsequent to the Delivery Date. The Buyer shall indemnify the Trustee
against all liability resulting from the failure of the Buyer to return such
cash credit balances or securities long positions as provided in the foregoing
sentence
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and against all liability arising out of any act or omission relating to any
Assigned Account on or after the Delivery Date.
8. Buyer's Acknowledgment. The Buyer acknowledges that it is engaged in
the securities business, understands the risks presented by the transactions
contemplated hereby, has been afforded the opportunity to review such financial
information, documents, records, and other materials of the Debtor as it has
requested, and has been afforded the opportunity to ask questions and receive
answers from the management of the Debtor concerning the assets, liabilities,
and operations of the Debtor and to obtain additional information as it may
reasonably require in connection herewith.
9. Transactions for the Trustee's Account. With respect to any physical
securities or depository security positions that the Trustee does not deliver to
the Buyer so that the Buyer has in hand on the Delivery Date those securities
that reflect or satisfy the security positions set forth in the records of the
Assigned Accounts, with the result that the Buyer has a short position or
charges relating directly or indirectly to such short position with respect to
such Assigned Accounts, the Buyer shall purchase such securities as will cover
such short position and other charges, first from the Trustee and then on the
open market, and the Trustee will settle such purchases and charges by the
payment to the Buyer of the actual purchase price of such securities on the
settlement date or the amount of such charges when due. The Buyer will commence
such purchases only after having afforded Trustee a reasonable period of time to
cover such short positions with the Buyer. The Buyer is aware that Trustee may
encounter delays in covering such positions due to circumstances beyond the
control of the Trustee. The Buyer and Trustee shall negotiate in good faith to
resolve these situations.
10. Buyer's Cooperation in Regards to the Transfer of Customer
Accounts. The Buyer agrees it will not impose any charge or seek reimbursement
of any expenses from any customers that request to be transferred from the Buyer
to another firm for a period of three months following the transfer to the Buyer
of the accounts.
11. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State
of Minnesota and the applicable provisions of SIPA and the United
States Bankruptcy Code, and the Bankruptcy Court shall have the sole
and exclusive jurisdiction of all disputes arising under, in connection
with, or related to this Agreement. The parties consent to the
resolution of any claim hereunder in the Bankruptcy Court pursuant to
the Bankruptcy Court's core jurisdiction.
(b) Section headings contained herein are for convenience of
reference only and shall not limit or affect the meaning of any
provision hereof.
(c) This Agreement constitutes the entire agreement and
understanding among the parties and supersedes any prior negotiations,
agreements, or understandings among the parties relating to the subject
matter hereof.
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(d) This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed to be an original and
all of which together shall constitute one and the same instrument.
(e) The invalidity, illegality, or unenforceability of any
provision of this Agreement shall not, in any manner, affect, impair,
invalidate, or render unenforceable the remaining provisions of this
Agreement, which shall continue in full force and effect; provided,
however, that the Buyer shall have no obligations under Section 7 if
the Trustee's obligations under Section 2 shall be determined by the
Bankruptcy Court to be invalid, illegal, or unenforceable.
(f) Subject to the provisions of the United States Bankruptcy
Code, no remedy or right available to, herein conferred upon, or
reserved to any party hereto is intended to exclude any other remedy or
right, but every such remedy or right shall be cumulative and in
addition to any other remedy or right given hereunder or now or
hereafter existing. No delay or omission to exercise any remedy or
right arising as the result of any default shall impair any such remedy
or right nor shall the same be construed as a waiver of or consent to
any such default nor shall it affect any subsequent default.
(g) None of the terms and conditions of this Agreement shall
be modified, terminated, or waived except pursuant to a written
instrument executed by all parties hereto. No modification, termination
or waiver shall affect the right of any party to enforce any claim or
right which accrued prior to the date of such modification,
termination, or waiver unless otherwise specifically stated in writing.
(h) Any notice required to be given hereunder to any party
hereto shall be in writing delivered in person or sent by certified
mail, postage prepaid, return receipt requested, to such party at the
address of such party designated below or at such other address as such
party may in the future designate by notice to all other parties given
in conformity with the foregoing and shall be deemed to have been given
when personally delivered or three business days after deposit in the
United States mail. Until changed, the addresses of the parties shall
be as follows:
Trustee: Xxxxx X. Xxxxxxxxxx, Trustee
Faegre & Xxxxxx LLP
2200 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Buyer: SWS Securities, Inc.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
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SIPC: Securities Investor Protection Corporation
000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, General Counsel
(i) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors,
permitted assigns, and legal representatives. No party hereto may
assign any of its rights or delegate any of its obligations hereunder
without the written consent of all other parties hereto.
(j) The parties shall execute such other and further documents
as may be necessary to effectuate the objects and purposes of this
Agreement.
(k) Nothing herein shall be construed or deemed to constitute
any of the parties hereto as a joint venturer or partner of any one or
more of the other parties hereto.
(l) The transactions to be consummated on the Delivery Date
shall be so consummated at a closing to be held at such place and date
as shall be mutually agreed upon by the parties hereto.
[Signature page follows]
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In witness whereof, the parties have caused this Agreement to be
executed on the date first written above.
/s/ XXXXX X. XXXXXXXXXX
-----------------------------------------
Xxxxx X. Xxxxxxxxxx, solely in his
capacity as Trustee for the
liquidation of the business of MJK
Clearing, Inc.
SWS SECURITIES, INC.
By: /s/ XXXXX XXXXXXXXX
--------------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Executive Officer
SECURITIES INVESTOR PROTECTION
CORPORATION
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: General Counsel and Secretary
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EXECUTION COPY
SCHEDULE 1.1
Certain Accounts
This Schedule 1.1 provides for securities and funds in certain Assigned
Accounts to be transferred by the Trustee to the Buyer notwithstanding the
limitation contained in Section 2(f) of the Agreement. Any securities and funds
in an Assigned Account to be transferred in accordance with this Schedule 1.1
shall be in addition to the securities and funds, if any, in such Assigned
Account otherwise to be transferred pursuant to Section 2(f).
This Schedule 1.1 applies only to (i) accounts listed in this Schedule
1.1 as accounts of persons that exceed the limits of protection set forth in 15
U.S.C. Section 78fff-3, and (ii) accounts listed in this Schedule 1.1 as
accounts of brokers, dealers, or banks.
In addition to the securities and funds, if any, in any such Assigned
Account otherwise to be transferred pursuant to Section 2(f), the Trustee shall
transfer 90% percent of the net equity in such account based upon the value of
the securities and funds in such account as of the Filing Date, provided that
the securities and funds so transferred plus the securities and funds, if any,
otherwise transferred pursuant to Section 2(f) of the Agreement, does not exceed
100% of the net equity in such account based upon the value of the securities
and funds in such account as of the Filing Date. The Buyer shall accept, on a
pro rata basis, a portion of each position in each account so that the aggregate
value of all securities and funds accepted by the Buyer for such account
pursuant to this Schedule 1.1 shall be equal to 90% percent of the net equity in
such account. To the extent an account holder provides the Trustee with cash,
cash equivalents, or other collateral acceptable to the Trustee, the Trustee
shall release additional equity from that account pursuant to the procedure
described in the preceding sentence.
Accounts of Persons That Exceed the Limits of Protection Set Forth in
15 U.S.C. Section 78fff-3
NOTE: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE AGREEMENT OR IN
THE FOREGOING PROVISIONS OF THIS SCHEDULE 1.1, IF ANY OF THE ACCOUNTS LISTED
BELOW THIS HEADING ARE ACCOUNTS DESCRIBED IN CLAUSES (a) OR (d) OF THE
DEFINITION OF ASSIGNED ACCOUNTS IN SECTION 1 OF THE AGREEMENT, SUCH ACCOUNTS
WILL NOT BE ASSIGNED AND THE INCLUSION OF ANY SUCH ACCOUNT IN THE LIST BELOW
THIS HEADING SHALL BE DISREGARDED AND SHALL BE OF NO FORCE AND EFFECT
